DIR September 2016 Editor’s Note

DIR September 2016 Editor’s Note

Take a Hard Look at Your Bottom Line


With the fall/winter selling season just around the corner (yes, it’s sad to say that summer is nearly a memory and it’s September already), it’s always a good time to think about how retailers can improve their bottom line.

Jerry Grossman

I read an article by a consultant at McKinsey & Company recently who suggested some changes retailers should consider to improve profits and performance. While not all are applicable to everyone, each is a worthy exercise. Here they are in no particular order.

Retailer Considerations for September

1. Examine where your profits are coming from. If retail sales of traditional products continue to drop, can you offer services and other initiatives to expand future revenue sources?

2. Create road maps to cut costs. Take a hard look at operating costs. McKinsey believes all retailers should address three cost levers: direct product costs; the indirect costs of goods not for resale; and labor costs. Retailers who tackle these levers comprehensively can reduce costs by up to 20–30%, which is what they’ll need to do in an intensely competitive environment.

3. Get serious about using data and analytics for decision-making. Gathering and analyzing data to understand the needs, preferences and attitudes of growing consumer segments, such as Hispanics, baby boomers and millennials, will be especially important—as will understanding individual consumers and customizing offers on a one-on-one basis.

4. Rethink assortments and product offerings. As prices and inventory availability become more transparent, retailers will not survive just by being “pass through” sellers of national brands. They will have to give consumers a reason to choose their stores over competitors. No longer will consumers shop at a retailer simply because it happens to be where a product is distributed. Instead, they will seek out retailers who provide value in new and different ways.

Some fresh thinking and good planning might contribute more to your bottom line this year and beyond.